The FAANG Stock For Options Bears Next Month

AMZN has averaged a 2.61% drop for the month of December during the past 10 years

Digital Content Manager
Nov 27, 2019 at 12:53 PM
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With the unofficial start to the holiday shopping season kicking off during Black Friday, investors might be interested to see which stocks tend to do the best, and which are notorious underperformers next month. One name that could come as a surprise is Amazon.com, Inc. (NASDAQ:AMZN). In fact, the e-commerce giant is the only FAANG name to show up on Schaeffer's Senior Quantitative Analyst Rocky White's list of worst stocks to own during December. 

According to White's data, AMZN has ended positive in December just 30% of the time during the past 10 years, averaging a 2.61% monthly loss. From its current perch at $1,808, a similar move would put the security just north of the $1,760 region -- near this month's lows. 

worst spx stocks december

Taking at look at AMZN's recent behavior, the stock has been climbing higher this week, bouncing off those November lows. The security is on pace for its fourth straight win today, and is testing its footing back atop the 200-day moving average -- a recent ceiling for the shares after they sliced through it during their late-September slide. 

AMZN Nov 27

While analysts are still ridiculously bullish on Amazon (25 of the 29 in coverage call it a "strong buy"), some of this optimism may be chipping away. Just yesterday Pivotal Research sliced its price target to $2,100 from $2,500, but maintained its "buy" rating. This put the consensus 12-month price target at $2,167.56 -- a roughly 20% premium to current levels. 

Short-term options traders have taken a put-heavy approach, as evidenced by Amazon's Schaeffer's put/call open interest ratio (SOIR) of 1.13, which ranks in the 92nd percentile of its annual range. However, more recent activity on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) AMZN shows AMZN with a 10-day call/put ratio of 1.54, which sits in the 98th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

It's certainly an attractive time to purchase options premium on Amazon. The security's Schaeffer's Volatility Index (SVI) of 18% sits in the 7th percentile of its annual range. This means short-term AMZN options are pricing in relatively low volatility expectations right now. 

 

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